Monday, November 28, 2011

Judge Rakoff does the right thing

It's about time that a judge has stood up for accountability by Wall Street. When Citicorp (parent of my least favorite bank, CitiBank) was sued by the SEC for betting against mortgages which it had mislead investors about, the company was quick to settle because it didn't have to admit guilt. (I wrote about this in a previous blog.) In other words, it had to pay money but didn't have to acknowledge its sleazy behavior, so typical of how Wall Street acted during and after the disaster it caused. Judge Rakoff was having no part of this whitewash. Because this is such a wonderful, clear and reasonable ruling, I have reproduced below (in red) some excerpts from the AP story -- check out especially the last paragraph (in bold). I haven't read the NY Times account yet, but I'm sure I will savor it

U.S. District Judge Jed Rakoff said the public has a right to know what happens in cases that touch on "the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives." In such cases, the SEC has a responsibility to ensure that the truth emerges, he wrote.

Rakoff said he had spent hours trying to assess the settlement but concluded that he had not been given "any proven or admitted facts upon which to exercise even a modest degree of independent judgment." He called the settlement "neither fair, nor reasonable, nor adequate, nor in the public interest."

The SEC had accused the bank of betting against a complex mortgage investment in 2007 — making $160 million in the process — while investors lost millions. The settlement would have imposed penalties on Citigroup even as it allowed the company to deny allegations that it misled investors.

The SEC allowed the consent judgment settling the case to be filed the same day it filed its lawsuit against Citigroup, the judge noted.

"It is harder to discern from the limited information before the court what the SEC is getting from this settlement other than a quick headline," the judge wrote.

"In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers," Rakoff said. "Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."

"Contrivances" -- what a put down! Rakoff should be made an honorary member of the Occupy movement, and should be honored as one of the few in power who are not sucking up to the banks and their holding companies.